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Comment by jacobheric | Hacker News Reader

While your experience is interesting and instructive in general, I think it's not completely relevant to the specific loans outlined here. These loans are issued directly by the SBA, from federal treasury funds, for the purpose of assisting businesses that might otherwise not survive the economic impacts of covid. For any small business in that situation, it seems a reasonable option.

IANAL, but the collateral terms as I read them are very specific and limited to business machines and such, not your house or your car.

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My particular case is just an example.

The most important thing to know is that getting a loan now, without a very good plan to paying it back, is extremely risky.

For example, if you own a restaurant and have a lease, it would be a very bad idea to get a loan to pay for that lease. We don't know how long this is going to last. So by the time you are able to reopen the restaurant you might have an insurmountable debt which takes out the business and potentially makes you personally liable.

I haven't looked into the details of the SBA loans, but usually if you get a loan and then file for bankruptcy without paying it, you could be liable for fraud if you knew you wouldn't be able to pay back the loan (at the time you signed it) - which is potentially the case for most businesses that might be looking into loans now.

Loans are not a silver bullet, please business owners be careful.

There are also possibly other routes for the inherent property costs. The details haven't been clear but it it looking like lease payments might be freezable pretty soon.

The one thing that businesses absolutely shouldn't be doing right now, though, is retaining surplus staff. This is depressing and such, but the correct way for us to deal with this issue as a society is to push those folks who need assistance in these times onto unemployment and bolster that program, giving the best chances for business to come through the far side of the pandemic able to open their doors again.

If you state/locality has laws around temporary layoffs this is the perfect time to exercise them, most such laws will defer any mandatory severance[1] until the employee is refused work or fired - but still allows those employees access to safety net funding.

Please do note, I've been following Canada a bunch closer than the US but it is my impression that the US response is working pretty similarly.

1. Usually not a thing in the US, but it is pretty standard elsewhere.

> but it it looking like lease payments might be freezable pretty soon.

Is that in Canada or the US?

If the US, do you have a link to that info? I haven't seen any talks of lease/mortgage/rent freezes outside of Europe and LatAm.

Thank you.

In the US it looks like some businesses have been refusing to pay rent[1], California has asked banks (who agreed except Bank of America) to freeze mortgage payments for 90 days[2] and there is a national freeze on evictions in the US for residential properties overseen by HUD or backed by Freddie/Fannie Mac[3]. Unfortunately it looks like you're correct in the US, no specific help is guaranteed.

I'd still suggest trying to reach out to your landlord to defer payments if you own a commercial property - some sectors of the economy are fine, but Amazon isn't going to want to move into an old Wendy's for extra office space. Since everyone nation-wide is in the same boat there is some safety in leaning on the crisis. Do try and preserve any liquid assets in your business as long as possible, they may be required for funding an attempt to qualify for relief or to spin up the business on the far side of the virus and that money is more valuable in the pockets of small business than in real-estate owners that, honestly, aren't facing this crunch nearly as hard since their main pressure would be from property tax & utility requirements.

1. https://la.eater.com/2020/3/25/21194144/cheesecake-factory-r...

2. https://www.nytimes.com/2020/03/26/us/90-day-mortgage-relief...

3. https://www.reuters.com/article/us-health-coronavirus-evicti...

The loans from the stimulus package are not issued by the SBA, they are issued by banks and other lenders.

There is a lot of confusion now, the loans were only launched yesterday (Friday April 3rd), and most lenders don't even know what the terms are.

A business owner I know filed for a loan directly on the SBA website on Tuesday (April 1st), following the SBA instructions. They still haven't gotten even an email back. They started calling banks on Friday and they were either unavailable (branches closed, phone numbers don't work), or they didn't even know how to process the loans yet.

Here's a New York Times article from yesterday that shows how messy this is: https://www.nytimes.com/reuters/2020/04/03/business/03reuter...

Banks are also adding their own conditions, so no one really knows if they will require guarantees or not. According to the SBA website, the loans to cover payroll are forgivable, but it doesn't say if they'll require a guarantee or not to give it out. That seems like it will be up to the banks to decide.

At this rate, businesses will be lucky if they are able to get a loan within 30 days. Considering that most businesses barely have about 2 weeks worth of cash reserves and that this whole thing started about 3 weeks ago, it looks like very few businesses will be able to take advantage of the SBA loans and that even fewer will survive.

I looked at a SBA loan several years ago and it required a personal guarantee. Almost all small business loans require this.

The new rules eliminate personal guarantees for loans <$200K.

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